Marianne Unit 5 IGCSE

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1

Debt Finance

Borrowing money from a bank which must be repaid with interest

2

Equity Finance

Selling shares in the business to raise finance rather than borrowing

3

Internal Sources of Finance

Finance sourced from inside the business, for example, owner’s funds, sale of assets and retained profit

4

Loan

Bank lends a fixed amount for an agreed time period, which must be repaid with interest

5

Long term finance

Finance required for periods usually longer than one year

6

Micro Finance

Lending small amounts of finance small business people to those who can’t access finance from another source

7

Overdraft

Banks allow businesses to take additional money out of their account up to a certain limit

8

Owners savings

Using owners’ own savings to finance the business

9

Sale of assets

Selling equipment /machinery/inventory to raise finance for a business

10

Short-term Finance

Finance required for short periods usually less than one year

11

Start Up Capital

Money required to set up a business and keep the business operating until the business breaks even

12

Trade Credit

Delaying payment to suppliers for an agreed time period

13

Cash flow

Cash flow in and out of the business over a period of time

14

Cash flow forecast

Estimate of future cash inflows and outflows usually calculated month by month to ensure there is enough cash to pay short-term debts

15

Cash Inflow

Cash going into a business

16

Cash outflow

Cash going out of the business

17

Crowd Funding

Raising finance by raising small amounts of money from many people, usually via the Internet

18

Net cash flow

Cash inflows - cash outflows

19

Trade receivables

Sales made by a business, but still awaiting payment (current asset)

20

Working Capital

Capital available to a business day to day to pay short-term debts (Current Assets – current liabilities)

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Profit

Sales revenue minus total costs of making a product/service

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Retained Profit

Reinvesting profits back into the business

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Account Payable

Unpaid bills or payment owed by a business which must be paid (current liability)

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Assets

Items of value owned by the business like buildings, vehicles, equipment, machinery

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Capital Employed

Money invested in a business (buildings, machinery)

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Current Assets

Items of value that the business won’t keep for longer than a year, like cash or inventory

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Liabilities

Debts owed by the business, for example, bank loans

28

Non current assets

Items of value the business will keep longer than one year, for example land, buildings, equipment and vehicles

29

Non-current liabilities

Debts which will last longer than one year, like a long-term loan for new production machinery